Executive Briefings

Labor Abuse in Asia: A Problem That Won't Go Away

By: Robert J. Bowman, SupplyChainBrain 12.09.2013

It's no secret that working conditions in overseas factories are often miserable. Manufacturers and retailers, bombarded by decades of public outcry, have had plenty of time to do something about it. So why are we still having this discussion?

That was the question asked by Tara Norton, director of advisory services with Business for Social Responsibility (BSR), at the organization's recent annual conference in San Francisco. She posed it to three panelists who are immersed in the task of creating sustainable and equitable supply chains: Dan Rees, program director with Better Work; Carmel Giblin, chief executive officer of Sedex;and Marcela Manubens, global vice president for social impact with Unilever.

Rees's reply wasn't very encouraging. "I don't think [working conditions in factories] are a high enough priority for most businesses," he said. It's not enough for manufacturers to hew to a set of externally developed labor standards. What's lacking is top management's commitment to linking worker rights to the things that really drive value within a business: forecasting, product design, production planning and the like.

Secondly, despite strict worker-protection rules promulgated by groups such as the International Labour Organization (ILO), enforcement in many parts of the world is "absolutely lacking," said Rees. "There's a governance gap in many supply chains because there's one in countries."

Rees believes private companies shouldn't be expected to tackle the challenge on their own. "Business must be more assertive to push governments to start acting like governments," he said. "Smart legislation that leads to change is possible."

Giblin wasn't quite so downbeat. She said companies and human-rights organizations like Sedex are doing a better job of identifying the issues to be addressed. Companies are beginning to move the subject "more centrally to the business, not just the ethical team. Therefore, it is starting to change a little."

Marubens agreed with Rees that too much of the burden for change rests on the shoulders of corporations, who are forced to assume the role of local law enforcer with their suppliers. Contrary to what many CEOs appear to believe, she insisted that there's a solid business case to be made for ensuring the humane treatment of overseas workers. She pointed to the recent spate of deadly factory fires in Bangladesh as evidence of the cost of non-compliance - in terms of both human lives and, yes, corporate profits.

In many cases, though, business is part of the problem. Suppliers are under relentless pressure to meet high production goals and tighter deadlines for delivery. Recall the notorious case of then-Apple chief Steve Jobs declaring at the last minute that the new iPhone's screen should be made of glass instead of plastic - a decision that forced Foxconn Electronics workers out of their beds in the middle of the night, at the contract manufacturer's plant in Shenzhen.

What about supplier-customer collaboration? "It's an overused word," said Giblin. "We're not really achieving the true value of it yet." On the contrary, suppliers are often fearful that information about their business practices will be used to punish them. And they're confused about what the customer needs to know. Original equipment manufacturers must do a better job of articulating why sustainability is a critical concern, said Giblin.

That's not an issue at Unilever, according to Marubens. The company's requirements of its 160,000 suppliers "are very basic," she said. The consumer-products giant is "very prescriptive" about ensuring that they observe a rigorous code of conduct.

Still, she acknowledged that businesses in general could do a better job of adopting language that is more inclusive, and dictate labor practices that are more closely integrated within the organization. Audits and supplier-education programs alone won't get the job done.

Chinese suppliers might be motivated to improve working conditions out of self-interest. Another panel at the BSR conference looked at the growing difficulty of attracting workers to the factories of southeast China.

Graeme Elder, global director of social responsibility with Jabil Circuit, Inc., said younger workers are more demanding of their rights, and less loyal to employers than their predecessors. In addition, the rise of social media within China is shining the spotlight on employer abuses. "Recruitment is becoming a big challenge," he said.

The Chinese government, meanwhile, is being forced to develop policies "that are not so insular." In fact, Chinese officials appear committed to a rise in factory wages, as a means of creating a strong middle class that can fuel domestic demand.

Tenie Ren, a factory supervisor with Avery Dennison in China, said his company is laboring to create a better environment for plant employees, in order to attract and retain workers. "If their engagement is good," he said, "they will choose our company."

Elder suggested that companies deploy social media tools to improve communications within the factories. In the process, they can become more responsive to workers' needs. But the mere existence of an on-site Twitter or Facebook account won't correct the serious labor problems still imbedded in plants throughout Asia. Employers will continue to place profits ahead of ethical practice unless they're forced to comply with strict rules for the fair treatment of workers. And smaller suppliers may have no choice at all.

In the meantime, the so-called governance gap continues. "Many factories are much safer," said Rees. "But the really tough stuff is waiting."

That was the question asked by Tara Norton, director of advisory services with Business for Social Responsibility (BSR), at the organization's recent annual conference in San Francisco. She posed it to three panelists who are immersed in the task of creating sustainable and equitable supply chains: Dan Rees, program director with Better Work; Carmel Giblin, chief executive officer of Sedex;and Marcela Manubens, global vice president for social impact with Unilever.

Rees's reply wasn't very encouraging. "I don't think [working conditions in factories] are a high enough priority for most businesses," he said. It's not enough for manufacturers to hew to a set of externally developed labor standards. What's lacking is top management's commitment to linking worker rights to the things that really drive value within a business: forecasting, product design, production planning and the like.

Secondly, despite strict worker-protection rules promulgated by groups such as the International Labour Organization (ILO), enforcement in many parts of the world is "absolutely lacking," said Rees. "There's a governance gap in many supply chains because there's one in countries."

Rees believes private companies shouldn't be expected to tackle the challenge on their own. "Business must be more assertive to push governments to start acting like governments," he said. "Smart legislation that leads to change is possible."

Giblin wasn't quite so downbeat. She said companies and human-rights organizations like Sedex are doing a better job of identifying the issues to be addressed. Companies are beginning to move the subject "more centrally to the business, not just the ethical team. Therefore, it is starting to change a little."

Marubens agreed with Rees that too much of the burden for change rests on the shoulders of corporations, who are forced to assume the role of local law enforcer with their suppliers. Contrary to what many CEOs appear to believe, she insisted that there's a solid business case to be made for ensuring the humane treatment of overseas workers. She pointed to the recent spate of deadly factory fires in Bangladesh as evidence of the cost of non-compliance - in terms of both human lives and, yes, corporate profits.

In many cases, though, business is part of the problem. Suppliers are under relentless pressure to meet high production goals and tighter deadlines for delivery. Recall the notorious case of then-Apple chief Steve Jobs declaring at the last minute that the new iPhone's screen should be made of glass instead of plastic - a decision that forced Foxconn Electronics workers out of their beds in the middle of the night, at the contract manufacturer's plant in Shenzhen.

What about supplier-customer collaboration? "It's an overused word," said Giblin. "We're not really achieving the true value of it yet." On the contrary, suppliers are often fearful that information about their business practices will be used to punish them. And they're confused about what the customer needs to know. Original equipment manufacturers must do a better job of articulating why sustainability is a critical concern, said Giblin.

That's not an issue at Unilever, according to Marubens. The company's requirements of its 160,000 suppliers "are very basic," she said. The consumer-products giant is "very prescriptive" about ensuring that they observe a rigorous code of conduct.

Still, she acknowledged that businesses in general could do a better job of adopting language that is more inclusive, and dictate labor practices that are more closely integrated within the organization. Audits and supplier-education programs alone won't get the job done.

Chinese suppliers might be motivated to improve working conditions out of self-interest. Another panel at the BSR conference looked at the growing difficulty of attracting workers to the factories of southeast China.

Graeme Elder, global director of social responsibility with Jabil Circuit, Inc., said younger workers are more demanding of their rights, and less loyal to employers than their predecessors. In addition, the rise of social media within China is shining the spotlight on employer abuses. "Recruitment is becoming a big challenge," he said.

The Chinese government, meanwhile, is being forced to develop policies "that are not so insular." In fact, Chinese officials appear committed to a rise in factory wages, as a means of creating a strong middle class that can fuel domestic demand.

Tenie Ren, a factory supervisor with Avery Dennison in China, said his company is laboring to create a better environment for plant employees, in order to attract and retain workers. "If their engagement is good," he said, "they will choose our company."

Elder suggested that companies deploy social media tools to improve communications within the factories. In the process, they can become more responsive to workers' needs. But the mere existence of an on-site Twitter or Facebook account won't correct the serious labor problems still imbedded in plants throughout Asia. Employers will continue to place profits ahead of ethical practice unless they're forced to comply with strict rules for the fair treatment of workers. And smaller suppliers may have no choice at all.

In the meantime, the so-called governance gap continues. "Many factories are much safer," said Rees. "But the really tough stuff is waiting."